A personal budget is a home budget that entails a financial plan that allocates income to cater to your needs and wants such as savings, retirement and debt payment. When making a personal budget you have to look at past and current expenditure to get a clear picture of how you spend your income.
Statistically one in four parents never talks to their children about finances and the result is they end up with debts and need support as young adults. There is no set age or time to start budgeting so it is preferable you start immediately.
Process of creating a Personal budget
Creating a personal budget is a learning process that highlights areas you have to work on and how to make better choices. With this in mind there are steps you can follow to create a budget that works for you.
The first step to make is to check your after tax income. You could have several businesses or investments that add to your monthly income so having the total amount makes the process simpler.
Second you should collect all your financial statements that will be contributing factors in your budget as well as the previous month’s so that you can go through them. The previous month’s statements will act as a reference point in your decision-making. Once done separate fixed and variable expenses so that you can have an easier time when allocating funds to each.
Lastly decide on a method that works and divide the funds while making well needed adjustments to suit you. Upon completion make sure that you check in to see if you are still on track or to make further adjustments.
Personal Budgeting tips
Each coin counts
The value of a penny in your pocket matters which is why when creating a budget plan all your money is accounted for.
In case you have a partner with whom you are contributing and sharing finances, you should strive to work together. By doing this you will have equal vote and opinions when creating a budget that works well for the two or more of you.
Creating a budget is a learning process with thing changing daily which is why you should keep track of it and make changes where necessary
Debts are an opportunity to make purchases or pay bills when you do not have the money at that moment. Once you have it you have to go through certain steps to becoming debt free and having a budget will help you set aside funds for it.
Working hard is great but actually seeing how much progress you have made gives you a performance boost. This happens with budgeting as well. Seeing how much of a difference you have in your financial habits will give you the encouragement and push to keep making good decisions.
What do you want to achieve with your budget? Having a goal or more that you want to meet is a strong motivator that encourages progress. Your goals should work hand in hand with your budget so that you can find some influence to work harder on sticking to your budget.
Room for mistakes
Humans are prone to error so don’t be too hard on yourself when you mess up. Failure gives you an opportunity to learn and be better so don’t be angry and give up. Instead pick yourself up and become better than before.
Having your own tailored budget is important as it gives you room and comfort to work with. Using someone else’s or comparing your budget to someone can leave you feeling insecure about your decisions. Making those changes might alter your life negatively.
We get up daily to work for a better future which is why you should do what you can to ensure you enjoy tomorrow. Saving money today awards you freedom to breathe and not be stressed when unintended events occur. When creating you should have room for savings and emergency funds to cushion you the moment the storm hits.
Pick a budgeting method
When purchasing clothes you try out a couple of outfits to find the right one but there are certain people who walk in and find it at that moment. Having a budgeting technique that works well with you is important and takes a while. To find the perfect fit you should try the available ones to see which is suitable for you.
Personal Budgeting Myths
There is a good reason myths are not to be believed and more often than not they offer a biased opinion of a person who seeks to control people’s views by controlling the narrative. As a human being you should be able to take a step back to find out the truth behind the words. Finance is plagues with a lot of myths that hold no weight and below are some of the myths and reasons why they are not true.
No fun money
When many hear the word budget they picture a restrictive life which is not the case. A budget offers opportunity to make better financial decisions so you don’t ruin your life over luxuries you want. Having a budget will make it easy to set aside fun money you can spend without fear.
No good at math
This is a funny excuse because there are several tools that can help you with the process including a calculator on your phone. Budgeting involves having an income and a list that you have to it spend on so you allocate what is necessary.
No financial struggle
Just because it is sunny today doesn’t mean it will not rain soon. Life is unpredictable so it is hard to determine what your financial future will look like. You can be comfortable today but unemployed tomorrow. The global pandemic should teach you about how this change fast and you have no control over what happens.
A budget is a primary priority for your financial health so setting aside an hour a month to work on it is not that much of a burden. If you create a full proof budget you could use it for a long time without having to redo and adjust it.
Not the right time
There is no better time than today to start improving your life. The expectation of a huge thing happening to you to change your outlook is a consequence that you don’t need. Make the best choice for yourself at the moment.
A budget is as restrictive as you allow it to be. If you want to maintain the simple pleasures of daily life such as buying coffee you still can. The only difference is that you put it down on paper and set aside enough money to cover it for the month. Your budget should accommodate and cater to your wants and needs.
Benefits of a Personal Budget
Pulling money out of pocket each time you are outside without a plan can leave you financially ruined. Many who have done this have seen the consequence that comes with it especially when you end up with your bills not being paid or no money being saved due to purchasing wants instead of needs. It’s easy to overspend when you don’t have a handle on each coin that you spend.
Goals are a vital part of being a human being. They give you something to look forward to or do to get something you want. While not all goals are positive, striving to have those that improve your life is important to you as a person. Having a budget will help you achieve goals you have that could involve traveling to places you can’t afford to pay out of pocket for or start a business you have dreamed about.
Having money is a wonderful thing, it gives you the luxury of choice in what you want to do, however, learning to manage your funds appropriately should be a priority. Setting priorities that safeguard how you use and save money is important and a budget provides that.
There is nothing as stressful as finding yourself stuck with nowhere to land when an unexpected event occurs or you are trapped in an environment that is not favorable to you because you don’t have money to hold you over the transition period. It could be a car accident leaving you paralyzed for months in which you cannot work or a toxic work environment. Having an emergency fund provides a safety net to hold you in tough times as you put yourself together and find a solution or next step. Budgeting your money will give you a way to remember to set aside a rainy day fund.
When your sunset days are approaching having a nest egg to keep you warm through it is important. Many parents often put the weight of their retirement on their children, telling them it is their job to take care of them in their old age which is wrong. Children are not an investment, saving your funds for retirement is.
In a recent study posted by annuity.org, fewer than half of women (49 percent) state saving for retirement as a priority, compared with 62 percent of men and that the average American started saving for retirement at age 27. Upon reaching teenage years people should be taught about the value of saving for retirement to prevent discomfort in later years.
We are all prone to bad habits because it is human to have them. These bad habits could be financial in which budgeting helps you realize it early and prevent it from happening. You will grasp on to the value of each coin you spend and learn to control the negative habits you have.
Owing a person or set organization money is not a bad thing, it is being an adult. Taking on debts can help you gain access to something you don’t have money for at the moment. Paying back debts can be a difficult task especially if it is a huge amount which is why creating a debt plan that goes along with your budget is important. You will be able to pay off debt without issue or strain.
Monthly bills, needs and wants list flood your mind daily making it easier to forget certain items. Having a budget will entail listing everything I need to purchase and or spend my money on which creates a system that helps you put things in order. Having this will help you keep up with bills and purchases as well as canceling things you don’t need such as gym memberships that you do not use or cable subscriptions that are charged to your credit cards.
As a person you make money to save money for tomorrow so you don’t have to suffer to make more money. Saving money is an integral part of your financial life because of the rewards from it. When your income is more than what you spend, the rest should be saved for another day or put towards something you want to do such as travel the world.
A budget is a plan that gets you running while others are walking by helping you achieve goals you would in the same amount of time. Staying ahead in matters of retirement, travel, starting a business is important as they give you a chance to place your life fully in your hands without sacrificing too much on a decision. Not having a budget makes it hard to start something the moment you decide to.
To be financially conscious you need to acquire and utilize certain skills such as budgeting. Many parents never bring up the topic of finance with their children so you have to learn more online. As you grow you realize that you never stop learning and growing which is why each time you learn information that helps you get financially stable, you should take the steps to do it. There is no age limit when learning how to budget, the right mindset is all you need.